The Three Major Economic Problems

2008-07-22 12:12

We know that our country is facing economic problems by just asking any businessman. Even the Malaysian Institute of Economic Research (MIER) has revised downward its forecast for Malaysia's economic growth to 4.6% from 5.4%. Also, the consumer sentiment index for the second quarter has dropped to a record low of 70.5 points.

High fuel prices and inflation have affected the people's confidence. If no consumption or low consumption continues, many companies will face cash flow problems and eventually go bankrupt. Even if there are good news from the 2008 Budget in August, it is unable to help the current situation.

The current situation is worsening inflation (Bank Negara may be forced to raise interest rates) and banks have started to tighten money supply. The business environment is poor. The government must formulate a strategy to revive economy in order to improve the situation.

"If the government does not reduce the size of it, how much money left that we can spend for development?"

Although the government is trying to reduce the people's burden, the country's economy may face three major problems, namely the implementation capacity, management capacity and lack of leadership.

Parliament has passed three times the request for additional funding, including more than RM17.5 billion for additional administrative expenses in 2007, RM30 billion for the 9th Malaysia Plan midterm review, as well as more than RM20 billion for subsidies. The total was RM67.5 billion but with poor implementation and management capacity, how could we ensure the money was used in the right places and not being wasted?

In addition, the money saving measures promoted by the government was not thorough enough. According to statistics, the government's average annual operating expenses is RM105 billion (more than half of the sum used to pay civil servants), which is 88% of the government's revenue. And averagely, it grew 10.5% from 2004 to 2008. It shows that the huge group of civil servants is indeed eroding the country's resources. If the government does not reduce the size of it, how much money left that we can spend for development?

The government is now too dependent on oil revenues as more than 40% of the treasury income are contributed by Petronas. The government will get extra revenue if oil prices are high but if the prices drop to lower than US$100 a barrel, and the government does not reduce its expenses, it has no choice but to borrow money to pay civil servants.

Petronas can annually contribute tens of billions but we will be out of oil one day. Only wealth obtained through creativity will last. Thus, institutional reform and personnel training are the only ways out during the national economic turmoil. Hopefully the government will realise this as soon as possible and leads the country out of difficulties. (By LIM SUE GOAN/ Translated by SOONG PHUI JEE/ Sin Chew Daily)